Firms, finance firms come under CLBO ambit

The Reserve Bank of India has permitted the Clearing Corporation of India Ltd (CCIL) to offer its indigeneously developed money market instrument "" collateralised lending and borrowing obligation (CLBO) "" to corporates and non-banking finance institutions for facilitating better funds management.

According to top officials in CCIL, the software and the technology required to connect corporates and other non-banking participants to CLBO system is under preparation where the web-based interface is provided by the IT venture of National Stock Exchange (NSEIt) and software is being designed by Tata Consulting Services (TCS). CBLO will be extended through internet to these particpants.

At present, various banks and institutions are participants to these product and some of the leading members are Life Insurance Coproration (LIC) and State Bank of India. The UTI-I, which is one of the arms of erstwhile Unit Trust of India, is also in the process of participating in the system so as to put into use its vast portfolio of gilts.

CLBO is a variant of liquidity adjustment facility provided by the RBI under repo and reverse repo mechansim . It has been designed to address short term fund management issues of entities that has been phased out from the call money market or have been imposed with restrictions on participation in the call money market.

At present, it is only available to members of negotiated dealing settlement (NDS) system of the Reserve Bank of India like banks, primary dealers, cooperative banks etc.

Repo is the process through which the RBI absorbs liquidity from the system while it injects liquidity through reverse repos.

Over and above, being a fully collateralised product unlike call money and the CRR provisions being exempted on CLBO borrowings, the most important features that makes it stand apart are the rollover facility for better portfolio management and early redemption facility which provides a exit route to the participant, said sources.

Meanwhile, the corporation has achieved a netting factor ratio of 81.86 per cent in foreign exchange settlements where it undertakes multilateral netting of member obligations in transactions both in dollar and rupees. The volumes in netting for the financial year ended March 31, 2003 stood at US $24,688 million.

Netting is the settlement of trade arrived after cancelling payment obligations on both lending and borrowing or buying and selling legs of transactions, wherein a player has to only pay or get paid the net amount and the not the gross.